Milk Income Loss Contract Program sign-up begins

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WASHINGTON — Sign-up for the Milk Income Loss Contract Program began Dec. 22 and will continue through the program’s expiration date, Sept. 30, 2012.

The 2008 Farm Bill reauthorizes the Milk Income Loss Contract Program, which operates similarly to the counter-cyclical payment program for crops, and makes three key changes in program operation.

Changes

Under the 2008 act, the Milk Income Loss Contract payment rate and the per-operation poundage limit are modified, depending on when the milk is produced.

In addition, a “feed cost adjuster,” is introduced over the life of the 2008 act, which adjusts the $16.94 per hundredweight (cwt.) benchmark price upward depending on the cost of feed rations.

When available, Milk Income Loss Contract payments are based on a payment rate percentage that is multiplied by the difference between a now-flexible target ($16.94 per cwt. or higher) and the specific month’s Boston Class I price of milk.

USDA’s Commodity Credit Corporation issues Milk Income Loss Contract payments on an operation-by-operation basis up to a maximum of 2.4 million pounds of milk produced and marketed (about 120 cows) from Oct. 1, 2007, through Sept. 30, 2008. The production limit per operation increases to 2.985 million pounds (about 145 cows) for each fiscal year from Oct. 1, 2008, through Aug. 31, 2012.

The production limitation reverts back to the original limit of 2.4 million pounds per fiscal year in Sept. 2012. The 2008 act adjusts the trigger price of $16.94 cwt., depending on the extent to which feed costs increase.

The feed cost adjustment takes effect when the monthly National Average Dairy Feed Ration Cost (calculated from the “entire month” prices published by the National Agricultural Statistics Service) is greater than $7.35 per cwt. beginning Jan. 1, 2008, through Aug. 31, 2012.

Calculations from Jan. 1, 2008, through Aug. 31, 2012, will be made at 45 percent of the percentage that the National Average Dairy Feed Ration Cost exceeds $7.35 per cwt.

Beginning with fiscal year 2009 marketings, which started Oct. 1, 2008, the 2008 act made changes to the provisions for payment eligibility to add an adjusted gross income limit.

If the individual or entity has annual nonfarm adjusted gross income for the relevant base period greater than $500,000, the individual or entity is not eligible for Milk Income Loss Contract benefits.

The base period will be set pursuant to adjusted gross income regulations yet to be issued. That rule will also define what is considered to be nonfarm income.

Rules

During the sign-up application period, participating dairy operations must select the month of the fiscal year to start receiving payments for eligible production. Producers submitting a contract application within 30 days of the beginning of the application period can select any preceding month as the start month.

Producers submitting contract applications after Jan. 21, 2009, will not have the option of selecting an earlier month as the payment start month for the dairy operation for a fiscal year; and will be limited to applicable start month selection rules.

Those general rules are that the start month must either be the month the contract is submitted or some later month. Changes in the month may be made from year to year so long as the designation is made by the 14th of the month proceeding the new start month.

Pound limits run from the start month and all pounds for which payment is received count against the limit for that fiscal year.

Eligible dairy producers are those who commercially produce milk in the U.S.
To receive program approval, producers must enter into a Milk Income Loss Contract with Commodity Credit Corporation and provide monthly milk marketing data. Dairy producers can apply for Milk Income Loss Contract at local FSA offices.

All payments in the program are subject to limits in the contract, regulations, and to changes in statutory provisions for payment.

More information on Milk Income Loss Contract is available at local FSA offices.

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